Ofcom toughens up on premium rate firms

Safeguards to protect people from being ripped off by premium rate phone lines were announced by the telecoms regulator today.

Ofcom carried out a review of the industry following growing concern about fraudulent or misleading services charging up to ?1.50 a minute. It has recommended a range of measures to strengthen existing rules and increase fines against unscrupulous firms.

Companies known as "network providers", which allocate the premium rate numbers, have been told to delay paying money to the firms providing the premium rate content for at least 30 days.

Some companies pass the money on within days, forcing customers to pay even if the service turns out to have breached industry rules.

The delay will allow Icstis, the watchdog for the premium rate market, time to assess complaints.

Network providers will have to freeze money generated by the service under suspicion while Icstis investigates. The cash can then be used to refund customers who have been ripped off.

Ofcom recommends the Department for Trade and Industry (DTI) considers increasing the maximum fine for breaching the Icstis code of practice. It also suggests extending the penalties to include network providers.

The code will be strengthened to ensure companies providing premium rate content have effective customer service and refund policies in place. The DTI ordered the review of the premium rate industry, worth ?850m in 2003, following a flood of complaints.

The numbers, normally starting 09, are often associated with chat-lines and adult services, but are now used for everything from mobile phone ringtones to TV programme vote-lines.

The biggest problems at the moment are so-called "rogue dialler" scams, which account for three-quarters of all complaints to Icstis. They land consumers with big bills by linking their computers to premium rate numbers without their knowledge.

The money generated by premium rate calls is shared by companies at three stages. Telecoms providers, such as BT, bill customers for the call and retain around 3p of the ?1.50 a minute charged.

The remainder is passed to the network providers, which keep approximately 10p to 20p. The rest, after VAT is deducted, goes to the service providers. These companies are often based overseas, making it difficult to follow up complaints.

Stephen Carter, chief executive of Ofcom, said: "There is a clear need for action here. "These are necessary changes to ensure consumer confidence in the premium rate industry for the long term."

Sir Peter North, chairman of Icstis, said: "The report identifies the key causes of consumer harm and concern, and we share Ofcom's assessment of the actions needed."